Goodyear Reports Record Sales for 2000
Global tire volume up 11.4% for year
Global rationalization, cost-cutting initiatives announced
Fourth quarter loss from operations is 11 cents per share
AKRON, Ohio, Feb. 14 The Goodyear Tire & Rubber Company
today reported its 2000 annual sales were a record $14.4 billion and announced
plans to improve its profitability during 2001.
Excluding rationalization charges and the impact of changing inventory
costing methods in the United States from last-in-first-out (LIFO) to first-
in-first-out (FIFO), Goodyear posted a loss from operations of $16.5 million
(11 cents per share) in 2000's fourth quarter versus income of $47.6 million
(29 cents per share) in the 1999 period.
The company reported a net loss of $102 million (65 cents per share) for
the fourth quarter of 2000. Net income in the fourth quarter of 1999 was
$37 million (23 cents per share). All per share amounts are diluted. All
prior periods have been restated to reflect the change in inventory costing
method.
The 2000 fourth quarter results include after-tax rationalization charges
of $93.7 million (59 cents per share) related to work force reductions and
facility consolidations around the world and $10.5 million (7 cents per share)
for rationalizations at the company's Australian tire joint venture, as well
as an after-tax benefit of $18.7 million (12 cents per share) due to the
change in the company's inventory costing method. An estimated additional
$64 million of rationalization charges will be recorded in the first quarter
of 2001. Fourth quarter results in 1999 included after-tax rationalization
charges of $6.8 million (4 cents per share).
While fourth quarter 2000 results reflect the benefits of strong
replacement tire shipments in North America, increasing raw material costs,
the deterioration of the euro's value versus the U.S. dollar and reduced
original equipment sales in North America had a negative impact.
"The severe decline in original equipment demand for tires and engineered
products in North America and the very soft winter tire market in Europe had a
substantial impact on our fourth quarter results," said Samir G. Gibara,
chairman and chief executive officer.
"Unrelenting high costs for raw materials, especially for oil-derived
products, continued to depress our results. Additionally, the euro's value
versus the U.S. dollar was a negative factor throughout the quarter," Gibara
added.
In response to these difficult conditions, Goodyear has increased prices,
reduced production to better align inventory levels with demand, curtailed
discretionary spending and taken steps to implement several work force
reduction initiatives.
"Our global rationalization initiatives will reduce worldwide employment
levels by more than 7,200 and should reduce costs by about $150 million in
2001 and about $250 million annually thereafter. Further savings will come
from simplifying our tire line offerings and the continued integration of our
Dunlop operations," Gibara said.
"Sales growth will be achieved through expansion in our distribution
channels, leveraging our valuable brands and stronger advertising. We are
intensifying our sales and marketing efforts in replacement markets," he
noted.
"Positively," Gibara said, "our North American consumer tire business,
capitalizing on a flight to quality in the replacement market, gained three
percentage points of market share in the fourth quarter."
Worldwide, Goodyear's fourth quarter sales were $3.5 billion in 2000,
versus $3.7 billion in 1999. The Dunlop operations, which were acquired in
September 1999, contributed $569.7 million in sales in 2000's fourth quarter
and $637.7 million in the 1999 period. The company estimates that currency
translation reduced sales by approximately $175 million and operating income
by $10 million in the 2000 quarter.
Tire volume in 2000's fourth quarter was 55.7 million units, up 1 million
units or 1.8 percent from last year. Volume for the fourth quarter included
9.2 million units shipped by the Dunlop operations in 2000 and 10.3 million in
1999.
Sales for 2000 were $14.4 billion, up 7.9 percent from $13.4 billion in
1999. The Dunlop businesses contributed $2.3 billion in sales during 2000 and
$873.4 million in 1999. The company estimates that currency translation
reduced 2000 sales by approximately $450 million.
Tire volume was 223.3 million units, up 22.8 million units or 11.4 percent
for the year. The Dunlop businesses shipped 37.3 million units during 2000.
Net income for 2000 was $40.3 million (25 cents per share). The results
include after-tax net rationalization charges of $100.1 million (63 cents per
share); an after-tax charge of $10.5 million (7 cents per share) for
rationalization actions at the company's Australian joint venture; and other
after-tax adjustments totaling $47.6 million (30 cents per share), including
the after-tax benefit of $44.4 million (28 cents per share) due to the change
in the company's inventory costing method. Excluding these items, income was
$103.3 million (65 cents per share) in 2000. The company estimates that
currency translation reduced operating income by approximately $30 million in
2000.
The 1999 net income of $243.2 million ($1.53 per share) included various
after-tax adjustments totaling $24.4 million (14 cents per share). Most
notable of these were net rationalization charges of $132.5 million (84 cents
per share) and a gain of $143.7 million (90 cents per share) resulting from
the completion of the company's Dunlop joint ventures in September 1999.
Excluding the adjustments, income from operations in 1999 was $218.8 million
($1.39 per share).
Capital expenditures in the 2000's fourth quarter were $203.4 million
compared with $245 million in the 1999 period. For the year, capital
expenditures were $614.5 million in 2000 and $805 million in 1999.
Depreciation and amortization expense in 2000's fourth quarter was
$154.6 million compared with $170.1 million in the 1999 period. For the year,
depreciation and amortization expense was $630.3 million in 2000 and
$581.7 million in 1999.
"Our fourth quarter and full year results were disappointing, especially
as much of our difficulty was caused by external factors," Gibara said. "We
have solid improvement plans in place for 2001.
"We look for our results to show quarter-over-previous-quarter gains in
the first half of 2001," he added. "We expect results for the second half of
2001 to exceed those of 2000's first half."
During the fourth quarter of 2000, the company changed its inventory
costing method and adopted accounting standard EITF Issue No. 00-10
"Accounting for Shipping and Handling Fees and Costs."
The change in inventory costing method from LIFO to FIFO for all domestic
inventories resulted in reduced cost of goods sold, increasing net income by
$18.7 million (12 cents per share) for the fourth quarter and $44.4 million
(28 cents per share) for the year. For 1999, the change reduced fourth
quarter net income by $3.8 million (2 cents per share) and increased net
income by $2.1 million (1 cent per share) for the year.
Adoption of EITF Issue No. 00-10 resulted in the reclassification to cost
of goods sold of approximately $526 million and $475 million in freight
charges previously recorded in net sales in 2000 and 1999, respectively. The
reclassification impact in the fourth quarter was $129 million in 2000 and
$125 million in 1999. Adopting the standard had no impact on operating
results.
Prior periods have been restated to reflect both changes.
Business Segments
Fourth quarter segment operating income was $78.2 million in 2000 and $139
million in 1999. For the 12 months, segment operating income was $599 million
in 2000 and $544.6 million in 1999. Segment operating income does not reflect
the rationalization charges and certain other adjustments in 2000 and 1999.
North American Tire Fourth Quarter Twelve Months
(in millions of dollars) 2000 1999 2000 1999
Sales $1,791.7 $1,720.6 $7,111.3 $6,648.6
Operating Income 63.6 7.4 260.7 26.3
Margin 3.5% 0.4% 3.7% 0.4%
North American Tire's unit volume in 2000's fourth quarter was up
3.8 percent from 1999 to 29.1 million units due to gains made in the
replacement market. For the year, volume was up 6.3 percent to 115.9 million
units due to the addition of the Dunlop operations and increased replacement
market sales following the Bridgestone/Firestone recall. The Dunlop
businesses sold 12.3 million units during 2000 and 4.1 million in 1999.
Dunlop sold 3 million units in the fourth quarter of 2000 and 1999.
During the fourth quarter, shipments of consumer tires for the replacement
market increased 14.6 percent over 1999, while original equipment volume was
down 16.4 percent due to slowing auto and light truck production. Shipments
of commercial tires for the replacement market were down 13.2 percent in the
2000 quarter due to softening demand, while original equipment volume was down
39.9 percent due to shutdowns at truck manufacturers. For the year, overall
unit volume was up 10.7 percent in replacement markets and down 2.1 percent in
original equipment markets from 1999 levels.
Sales revenue increased in both periods due to the higher replacement
market volume, however, competitive pricing had an adverse impact. Operating
income increased in both periods as a result of the higher replacement market
volume, but was negatively impacted by higher costs for raw materials and
energy and production cutbacks to better align inventory levels with original
equipment demand. Operating income in 1999 also included a charge for
inventory write-offs and other adjustments.
The change in inventory costing method increased operating income by $22
million for 2000's fourth quarter and by $46.5 million for the year. For
1999, the change reduced operating income by $5 million for the fourth quarter
and increased it by $6.5 million for the year.
European Union Tire Fourth Quarter Twelve Months
(in millions of dollars) 2000 1999 2000 1999
Sales $761.9 $950.2 $3,198.1 $2,642.7
Operating Income (Loss) (7.1) 64.7 88.7 188.0
Margin (0.9)% 6.8% 2.8% 7.1%
European Union Tire's volume in 2000's fourth quarter was down 4.5 percent
from 1999 to 15 million units principally because of weak winter tire sales.
Volume for the year was up 31.8 percent to 60.3 million units due to the
addition of the Dunlop operations. The Dunlop businesses sold 25 million
units in 2000, including 6.2 million units in the fourth quarter. Substantial
volume growth for the year was achieved in both replacement and original
equipment markets because of the additional Dunlop business. In 1999, the
Dunlop businesses sold 7.2 million units in the fourth quarter and
10.3 million for the year.
Sales revenue decreased in the fourth quarter due to the lower unit
volume; the continuing decrease in the value of the euro versus the U.S.
dollar and British pound; competitive pricing, especially in Germany; and an
adverse change in product mix. The euro's average value versus the U.S.
dollar fell 13 percent during 2000. The company estimates that currency
translation reduced sales by approximately $115 million in the quarter and
$300 million for the year.
The operating loss for the quarter and the decrease in operating income
for the year reflected competitive pricing, increasing costs for raw
materials, inefficiencies resulting from the ongoing rationalization of
manufacturing and logistics operations throughout the region and the negative
impact of currency translation. The company estimates that currency
translation reduced operating income by approximately $5 million in the
quarter and $20 million for the year.
Eastern Europe, Africa, Fourth Quarter Twelve Months
Middle East Tire
(in millions of dollars) 2000 1999 2000 1999
Sales $193.3 $218.5 $793.0 $812.9
Operating Income 8.2 15.5 54.6 49.8
Margin 4.2% 7.1% 6.9% 6.1%
Eastern Europe, Africa and Middle East Tire's volume in 2000's fourth
quarter was up 8 percent from 1999 to 3.9 million units, but down 1.5 percent
to 15.6 million units for the year. Revenues for the quarter decreased from
1999 due to an adverse product mix. Revenues for the year were down from 1999
due to the lower volume and the effects of currency translation. The company
estimates that currency translation reduced sales by approximately $25 million
in the quarter and $75 million for the year.
Operating income fell in the quarter because of the adverse product mix,
but increased for the year as a result of increased factory utilization levels
and more favorable market conditions. Additionally, the 2000 year was
negatively impacted by an industry-wide strike in Turkey.
Latin American Tire Fourth Quarter Twelve Months
(in millions of dollars) 2000 1999 2000 1999
Sales $262.4 $240.9 $1,047.9 $948.1
Operating Income 14.9 9.1 69.8 67.7
Margin 5.7% 3.8% 6.7% 7.1%
Latin American Tire's volume in 2000's fourth quarter was up 11.2 percent
from 1999 to 5 million units, and up 11 percent to 19.7 million units for the
year. Substantial growth was achieved in the original equipment market in
both periods. Replacement market volume was up for the quarter and the year.
Sales revenue in both periods increased as a result of the higher volume, but
was negatively impacted by competitive pricing, ongoing weak economic
conditions and currency translation.
Operating income increased in the quarter and the year on the higher
volume, but was negatively impacted by competitive pricing and high raw
material costs.
Asia Tire Fourth Quarter Twelve Months
(in millions of dollars) 2000 1999 2000 1999
Sales $119.8 $138.7 $524.6 $593.2
Operating Income (Loss) (1.7) 9.1 17.9 26.0
Margin (1.4)% 6.6% 3.4% 4.4%
Asia Tire's volume in 2000's fourth quarter was down 6.3 percent from 1999
to 2.7 million units, and 2.1 percent to 11.8 million units for the year.
Both 2000 periods and 1999's fourth quarter reflect the exclusion of
replacement market sales that were transferred to the company's Japanese joint
venture with Sumitomo Rubber Industries, as well as stronger original
equipment shipments. Sales revenue decreased in both 2000 periods as a result
of lower replacement market volume, competitive pricing and currency
translation.
The operating loss for the quarter and the decline in operating income for
the year resulted primarily from the lower volume, competitive pricing, high
raw material costs and the change in product mix.
Engineered Products Fourth Quarter Twelve Months
(in millions of dollars) 2000 1999 2000 1999
Sales $264.1 $281.0 $1,174.2 $1,234.8
Operating Income (Loss) (3.5) 9.8 43.1 70.4
Margin (1.3)% 3.5% 3.7% 5.7%
Engineered Products' sales revenue in 2000's fourth quarter and 12 months
decreased primarily because of the company's exit from the interior trim
business in 1999 as well as reduced demand for conveyor belting and for hose
and power transmission products in the North American original equipment
automotive and replacement markets. The operating loss in the quarter and the
decline in operating income for the year resulted from the lower volume,
competitive pricing conditions and production cutbacks to better align
inventory levels with demand.
The change in inventory costing method reduced operating income by
$0.3 million for 2000's fourth quarter and increased it by $1.3 million for
the year. For 1999, the change reduced operating income by $1 million for the
fourth quarter and $0.6 million for the year.
Chemical Products Fourth Quarter Twelve Months
(in millions of dollars) 2000 1999 2000 1999
Sales $282.2 $249.9 $1,129.7 $949.8
Operating Income 3.8 23.4 64.2 116.4
Margin 1.3% 9.4% 5.7% 12.3%
Chemical Products' sales revenue increased in 2000's fourth quarter and
12 months due to price increases and higher volume. Operating income
decreased in both periods primarily due to increased raw material and energy
costs and the inability to recover cost increases due to competitive pricing
conditions.
The change in inventory costing method increased operating income by
$2.9 million for 2000's fourth quarter and $10.6 million for the year. For
1999, the change reduced operating income by $0.1 million for the fourth
quarter and $2.5 million for the year.
Goodyear will hold an investor conference call at 8:30 a.m. ET today.
Shareholders, members of the media and other interested persons may access the
conference call on the Internet at http://www.goodyear.com/us/investor or via
telephone by calling (800) 406-5345 or (913) 981-5571 before 8:25 a.m. A
taped replay of the conference call will be available at 3 p.m. ET by calling
(888) 203-1112 or (719) 457-0820 and entering access code number 703931.
Goodyear is the world's largest tire company. Headquartered in Akron,
Ohio, the company manufactures tires, engineered rubber products and chemicals
in more than 90 facilities in 27 countries. It has marketing operations in
almost every country around the world. Goodyear, with the addition of its
Dunlop tire joint ventures, employs more than 105,000 people worldwide.
This news release contains certain forward-looking statements based on
current expectations and assumptions that are subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed by such statements. These risks and uncertainties include price and
product competition, customer demand for the company's products, the ability
to control costs and expenses, general industry and market conditions and
general domestic and international economic conditions, including interest
rate and currency fluctuations. The company disclaims any intention or
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise.
(financial statements follow)
The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Statement of Income
(In millions, except per share)
Fourth Quarter Twelve Months
Ended Dec. 31 Ended Dec. 31
2000 1999 2000 1999
(unaudited)
Net Sales $3,526.4 $3,677.1 $14,417.1 $13,355.4
Cost of Goods Sold 2,883.9 2,954.2 11,637.3 10,832.3
Selling, Administrative and
General Expense 575.1 581.3 2,237.3 2,016.7
Rationalizations 118.2 7.7 124.1 171.6
Interest Expense 76.9 55.9 282.6 179.4
Other (Income) Expense 10.4 1.1 27.8 (147.1)
Foreign Currency Exchange (7.5) 7.2 (6.7) (27.6)
Equity in Earnings of
Affiliates 17.4 (3.5) 22.4 (10.3)
Minority Interest in
Net Income of
Subsidiaries (4.0) 17.2 33.5 40.3
Income (Loss) before
Income Taxes (144.0) 56.0 58.8 300.1
United States and
Foreign Taxes on
Income (42.0) 19.0 18.5 56.9
Net Income (Loss) $(102.0) $37.0 $40.3 $243.2
Per Share of Common
Stock - Basic
Net Income (Loss) $(0.65) $0.23 $0.26 $1.55
Average Shares Outstanding 157.6 156.3 156.8 156.2
Per Share of Common
Stock - Diluted
Net Income (Loss) $(0.65) $0.23 $0.25 $1.53
Average Shares
Outstanding 159.4 158.8 158.8 158.9
The Goodyear Tire & Rubber Company and Subsidiaries
Consolidated Balance Sheet
(In millions) Dec. 31 Dec. 31
Assets 2000 1999
Current Assets:
Cash and Cash Equivalents $252.9 $241.3
Accounts and Notes Receivable,
less allowance - $93.3 ($81.9 in 1999) 2,074.7 2,296.3
Inventories:
Raw Materials 480.4 490.6
Work in Process 123.5 124.0
Finished Product 2,275.8 1,955.4
Total 2,879.7 2,570.0
Sumitomo 1.2% Convertible Note Receivable Due 8/00 -- 107.2
Prepaid Expenses and Other Current Assets 259.9 165.1
Total Current Assets 5,467.2 5,379.9
Long Term Accounts and Notes Receivable 92.8 97.7
Investments in Affiliates, at Equity 102.0 115.4
Other Assets 183.8 79.0
Goodwill 588.4 516.9
Deferred Charges 1,612.8 1,328.2
Properties and Plants,
Less Accumulated Depreciation - $5,862.6
($5,551.4 in 1999) 5,521.0 5,761.0
Total Assets $13,568.0 $13,278.1
Liabilities
Current Liabilities:
Accounts Payable - Trade $1,505.2 $1,417.5
Compensation and Benefits 823.6 794.5
Other Current Liabilities 395.6 294.5
United States and Foreign Taxes 208.4 249.0
Notes Payable 1,077.0 862.3
Sumitomo 1.2% Convertible Note Payable Due 8/01 56.9 127.8
Long Term Debt due within One Year 159.2 214.3
Total Current Liabilities 4,225.9 3,959.9
Long Term Debt and Capital Leases 2,349.6 2,347.9
Compensation and Benefits 2,310.5 2,137.4
Other Long Term Liabilities 334.1 149.1
Minority Equity in Subsidiaries 844.9 891.2
Total Liabilities 10,065.0 9,485.5
Shareholders' Equity
Preferred Stock, no par value:
Authorized 50 shares, unissued -- --
Common Stock, no par value:
Authorized 300 shares
Outstanding Shares - 157.6 (156.3 in 1999)
After Deducting 38.1 Treasury Shares
(39.3 in 1999) 157.6 156.3
Capital Surplus 1,092.4 1,029.6
Retained Earnings 3,558.8 3,706.9
Accumulated Other Comprehensive Income (1,305.8) (1,100.2)
Total Shareholders' Equity 3,503.0 3,792.6
Total Liabilities and Shareholders' Equity $13,568.0 $13,278.1
